Authors:Fan LiuFirst page: 1Abstract: Risk and time preferences influence the insurance purchase decisions under uncertainty. Accident forgiveness, often considered as “premium insurance,” protects policyholders against a premium increase in the next period if an at-fault accident occurs. In this paper, by conducting a unique experiment in the controlled laboratory conditions, we examine the role of risk and time preferences in accident forgiveness purchase decisions. We find that individual discount rates and product price significantly affect premium insurance purchase decision. Interestingly, we also find evidence that less risk averse policyholders in general behave more like risk neutral when making insurance decision. Risk attitudes affect insurance decision-making only among those who have relatively high degree of risk aversion.PubDate: 2018-06-27DOI: 10.5539/ijef.v10n8p1Issue No:Vol. 10, No. 8 (2018)

Authors:Pei Lin DengFirst page: 18Abstract: This paper augments a growing body of empirical literature on the turnover-return relationship of stock portfolios. From quarterly data over the recent decade, mutual funds that focus on smaller cap stocks are found to pay a greater performance penalty for active trading compared to those that focus on larger cap stocks. On average, managers in every fund focus type make investment decisions that benefit gross returns. However, detriment from excessive trading arises due to transaction costs. They are especially magnified for mutual funds that focus on smaller cap stocks. Findings herein also support previous studies that show fund managers execute lower-quality trades with tenure. The presented effect modification of trading activity by holdings focus type and manager tenure may be leveraged to refine portfolio investment strategies.PubDate: 2018-06-27DOI: 10.5539/ijef.v10n8p18Issue No:Vol. 10, No. 8 (2018)

Authors:Zi-ang Lin, Shaozhen Chen, Hongtao Liang, Hong ZhangFirst page: 28Abstract: Commodity futures are futures contracts based on the physical commodities. Unlike commodity stocks, which must be “bought first and then sold”, commodity futures can also be “sold first and then bought”. Therefore, it is not possible to directly use the formula of capital flow in the stock market to characterize the capital flow in futures contracts. In this paper, the principal component analysis method is used to construct the principal component factors based on the K-line basic market data and one based on the K-line index data. Then the factors mentioned above are cross-validated using the Holdout verification form to generate the training set and test of the support vector machine. Then, this paper applies genetic algorithm to optimize the penalty parameters and kernel functions of SVM, and obtains the parameters with the highest accuracy of classification and prediction of capital flow. Finally, this paper uses the traversal algorithm to find the time window with the highest accuracy of the SVM classification to predict the capital flow. The research results of this paper show that the SVM-based classification of capital flow in commodity futures market is highly accurate.PubDate: 2018-06-27DOI: 10.5539/ijef.v10n8p28Issue No:Vol. 10, No. 8 (2018)

Authors:Ru Zhang, Chenyu Huang, Weijian Zhang, Shaozhen ChenFirst page: 36Abstract: This paper takes CSI- 300 stock as the research object, and uses the LSTM model with memory characteristics and the traditional multi factor analysis to build an improved multi factor stock selection model. In back testing experiments, we use the trained LSTM model to forecast the stock returns and make a portfolio classification to construct the investment strategy. The result shows that the multi factor stock selection model based on LSTM has good profit forecasting ability and profitability.PubDate: 2018-06-27DOI: 10.5539/ijef.v10n8p36Issue No:Vol. 10, No. 8 (2018)

Authors:Bing-Qian Liu, Xiao-Yan Cao, Qi-Fan Yang, Yuan-Biao ZhangFirst page: 43Abstract: In recent decade years, the real-estate industry in China has achieved unprecedented development. Correspondingly, the rapid rise in house prices has led the government to introduce a series of macro-control policies. Based on the main regulatory mechanism of the purchase restriction policy, we take Haikou as an example to analysis the probable influence on housing price. We first select indicators from three aspects: supply, demand, and macroeconomic environment, and then establish a gray correlation model to extract the key factors of strong correlation, that is, real- estate investment, CPI, residential housing construction area, residential housing completion area. Moreover, we establish a multiple linear regression model based on GM (1, n) to obtain the multi-function relationship between commercial housing prices and these four key indicators. After that, we establish a population- purchases demand function model to predict the price of commercial housing in the coming year after introducing the purchase restriction policy. More significantly, we conclude that the purchase restriction policy can effectively regulate housing prices in the short term, but the long-term effect is limit.PubDate: 2018-06-30DOI: 10.5539/ijef.v10n8p43Issue No:Vol. 10, No. 8 (2018)

Authors:Boutheina Hachem, Hiyam SujudFirst page: 53Abstract: The aim of this research is to compare conventional and Islamic banks in various aspects of credit risk management processes. The study used 200 questionnaires, collected from 21 traditional banks and 4 Islamic banks in Lebanon. The results found that differences in the various issues of credit management between Islamic and conventional banks. Islamic banks are more understanding, aware, and cautious in their approach than traditional banks. Islamic banks are more efficient in assessing and analyzing credit risk than conventional banks. Lastly, Islamic banks are more used to credit risk mitigation than traditional banks.PubDate: 2018-06-30DOI: 10.5539/ijef.v10n8p53Issue No:Vol. 10, No. 8 (2018)

Authors:Peter Arroja EshunFirst page: 64Abstract: Mineral sector regulatory and fiscal policies in Ghana have undergone a lot of reforms over the past three decades in an effort to attract the much-needed Foreign Direct Investment (FDI) into the mineral sector and also to maximise the returns from the exploitation of mineral asset to the country. This paper puts in perspective the effect of changes in fiscal policies on the viability of mineral projects and assesses the general risk associated with investing in the mineral industry of Ghana, using the Sikaman Gold Mining (SGM) Project as a test case. Cash flow, sensitivity and risk analyses of the SGM Project under three fiscal regimes namely: PNDCL 153, Act 703, and amendments to Act 703, indicated the second regime as the most economically favourable as it gave the highest NPV and lowest risk. It is recommended that the government should involve the mineral industry players during such reviews to show all-inclusiveness. Furthermore, mineral investors are advised to explore stability and development agreements to protect their investments in the wake of changes in fiscal policies in the mineral industry of Ghana. Future research could consider comparing the current fiscal regime of Ghana with those of the competing countries within the Sub-Saharan African region to assess whether Ghana could continue to pride itself as a preferred investment destination within the sub-region.PubDate: 2018-07-04DOI: 10.5539/ijef.v10n8p64Issue No:Vol. 10, No. 8 (2018)

Authors:Ning WuFirst page: 77Abstract: With the continuous development of global economic integration and financial markets, international capital flows more and more frequently, the frequent flow of international capital will inevitably affect the yield of Chinese stock market. This article uses short-term international capital inflows SS and Shanghai composite index R as research objects. Based on monthly data from January 2002 to October 2017, VAR model was constructed using Eviews8.0 to study the impact of short-term international capital flows on Chinese stock market. Empirical studies have found that short-term international capital flow is the granger cause of changes in the Shanghai composite index yield, while the yield of Chinese stock market will not affect short-term international capital flows. At the end of this paper, relevant suggestions are put forward according to the conclusions.PubDate: 2018-07-04DOI: 10.5539/ijef.v10n8p77Issue No:Vol. 10, No. 8 (2018)

Authors:James N NdegwaFirst page: 84Abstract: There is currently no regulatory body or organized civil rights group that monitors the materiality of the cost of corporate philanthropy (CP) which has created a gap that is being exploited by many corporates to make no or insignificant donations to the public which is a potential source of conflict between the society and corporates. The current research has imported the auditing concept of quantitative audit materiality and applied it in the field of CP to test the materiality or significance of corporate philanthropy by listed firms in Kenya during the year 2013 with intention to monitor the significance of corporate philanthropy by Kenyan corporates. Purposive sampling technique was employed to select 16 out of 62 listed firms in Kenya where there was cost of corporate philanthropy reported by the firms. Descriptive statistical analysis and paired samples t-test were employed to analyses for significant or materiality of corporate philanthropy. The overall findings indicated that Kenyan firms made immaterial corporate donations with respect to their profit before tax (PBT). The study thus recommends for enactment of regulations to govern the matter of corporate donations in Kenya.PubDate: 2018-07-04DOI: 10.5539/ijef.v10n8p84Issue No:Vol. 10, No. 8 (2018)

Authors:John Bosco Nnyanzi, John Mayanja Bbale, Richard SendiFirst page: 92Abstract: Increasing domestic revenue mobilization remains a challenge for many governments, particularly in low-income countries. Using a sample of East African countries, the study sets off to investigate the impact of financial development from a multi-dimensional perspective on tax revenues for the period 1990 to 2014, and how political development and the control of corruption would enhance the observed nexus. The dynamic panel results from the system GMM estimation approach indicate a significant role of financial development overall and the financial institutions and financial markets in particular. A disaggregation of the duo suggests that it is the depth of financial institutions that greatly matters for tax revenue, with a one per cent change expected to yield about 0.26 per cent change in tax collections. It is then followed by their level of accessibility, financial market depth and efficiency. We fail to find significant evidence in support of financial market access and financial institutions efficiency although the possibility for the latter seems indismissible. Further evidence points to the catalytic nature of a good institutional and political environment in pursuit of higher tax-GDP ratio via financial development. Policies to promote the depth and accessibility of financial institutions as well the depth and efficiency of financial markets in East Africa alongside well-focused anti-corruption programs and democratic governance are likely to yield better fiscal outcomes in terms of domestic tax revenues critically needed to achieve the United Nations Sustainable Development Goals. We also confirm the positive role played by the lagged tax revenue, per capita GDP, trade openness, debt-to-GDP ratio and population density in the tax effort.PubDate: 2018-07-04DOI: 10.5539/ijef.v10n8p92Issue No:Vol. 10, No. 8 (2018)

Authors:Onyango Barnabas Ochien, Alphonce Juma OdondoFirst page: 105Abstract: Interest rate ceilings have been declining over the past decades as most developing countries continue liberalizing their financial policies. Prior to 2015, Kenya’s banking sector was vibrant and highly profitable. The sector loan book grew at an impressive compound annual rate of 16% in 2011 to 35% in 2015. However, after interest rate cap in 2016, there has been a general slowdown in micro lending and rise in non-performing loans. Some studies argue that the ceiling protects consumers from exploitation and guarantees access to credit while others observe the contrary. This study sought to establish the relationship between interest rate ceiling and micro lending in Kenya. It was anchored on financial accelerator effect theory and the theory of financial repression. The study relied on secondary data from Banks and Micro Entrepreneurs. Logit models were estimated to establish the relevant relationships. It was established that interest rate ceiling had significant negative association with credit supply and default rate. However, it had a significant positive association with cost of Credit. Both Nagelkerke’s R2 and Cox and Snell’s showed that the estimated model fitted well. The Wald criterion demonstrated that credit supply, costs of credit and default rate were significantly different from zero. Thus, the independent variables were significantly affected by interest rate ceiling. It is recommended that banks pursuing policy of increasing credit supply and reducing cost of credit should advocate for the repeal of interest rate ceiling while those interested in reducing default rate should advocate for its retention.PubDate: 2018-07-11DOI: 10.5539/ijef.v10n8p105Issue No:Vol. 10, No. 8 (2018)

Authors:Jyoti Gupta, Florian WagnerFirst page: 117Abstract: Using a comprehensive sample of 1830 open-market repurchases of 15 European countries encompassing the period from 1998 until 2013, we analyzed the magnitude and determinants of the share price reaction on announcement. Our results indicate that buyback announcements in Europe lead on average to a significantly positive abnormal return of 0.92% on announcement day, however, decreasing in firm size and announcement frequency. Additionally, our findings show that the market does not particularly greet the distribution of excess cash to shareholders, but rather when companies take advantage of undervalued stock as market-to-book values are inversely related to announcement returns. Looking at the companies’ leverage ratios, the motive of capital structure optimization cannot be supported by the empirical findings. Lastly, with respect to managerial market timing ability we could not observe that buybacks are following a period of share price underperformance, concluding that managers are not able to time the implementation of buyback programs.PubDate: 2018-07-11DOI: 10.5539/ijef.v10n8p117Issue No:Vol. 10, No. 8 (2018)

Authors:Dat-Dao Nguyen, Dennis KiraFirst page: 141Abstract: This study investigates a versatile forecasting technique using an integrated system of Artificial Neural Networks (ANN) and Genetic Algorithms (GA) in a mixture-of-experts architecture to solve a general economic forecasting problem involving a mix of temporal and non-temporal variables. Using Klein Model I as a context and previous estimations from traditional methods as benchmarks, the study provides evidence on the effectiveness and efficiency of this integrated system. ANN helps overcome the imposition of assumptions on the behaviors of related variables, the specification of exact relationships, and the difficulty in nonlinear estimations of the economic model. GA helps overcome the sub-optimality of the tedious trial-and-error process in network building. The flexibility of the mixture-of experts network architecture offers many alternative configurations to capture the peculiarities of variables in context before aggregating intermediate estimations into the final result. The integrated system has shown its ability in processing effectively the mixture of economic variables, and producing efficient estimations and forecasts.PubDate: 2018-07-11DOI: 10.5539/ijef.v10n8p141Issue No:Vol. 10, No. 8 (2018)